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tv   [untitled]    June 27, 2012 10:00am-10:30am EDT

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the house energy and commerce subcommittee on communications and technology is holding a hearing this morning on capitol hill on whether existing communication laws address the demands of new technology. witnesses including representatives for broadcasters, satellite, cable and the internet and online will discuss advances in technology and the impact on how consumers access video content. and we also invite you to share your feedback about this hearing on twitter, using #futuretv. we will post your thoughts and tweets after this hearing gets under way.
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>> repeating we are live in the rayburn house office building where the house energy and commerce subcommittee on communications and technology is gathering a hearing this morning on whether existing communication laws address the demands of new technology. we would like to hear from you. we would like your feedback about this hearing on twitter,
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using #futureoftv. we will post some of your thoughts and tweets after the hearing concludes. very quickly, the senate has gavelled in. lawmakers continuing to work on a five year extension of the national flood insurance program. if an agreement isn't reached on limiting amendments, we could see senators moving on to the highway bill and legislation to keep student loan rates from doubling next month. you can see the senate's live right now on c-span 2. the house just gavelled in. members are continuing fiscal year 2013 transportation hud spending along with votes on 11 suspension bills they debated yesterday. of course, tomorrow the house will likely vote on that contempt of congress resolution against attorney general eric holder, for withholding documents related to operation fast and furious. you can see the house live on our companion network, c-span.
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>> call to order, the subcommittee on communications and technology, and certainly welcome our panelists, witnesses who are here today. we very much appreciate your willingness to come and share your thoughts on the future of video. this is one of a series of hearings that we've organized. the first being future of audio, now future of video and eventually we'll do future of data as well, and later in july, we'll have all five fcc commissioners here now that it's up to full-functioning status. we look forward to that hearing as well as we look at these various rules and laws that have
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been on the books for a long time and in an era when the marketplace continues to evolve and change dynamically and in a very rapid way. the fcc regulates traditional video providers based on a bygone era, when congress passed the 1992 cable act, for example, cable operators controlled 98% of the paid tv distribution market and were affiliated with 53% of the national program networks. that law was meant to spur competition. it worked. nationwide, satellite tv providers, dish and directv now control approximately one-third of the market and are the second and third largest providers. only 15% of national program networks are vertically integrated with a cable operator. broadcast stations are going mobile, wireless carriers are streaming video. programmers and paid tv providers are filling smartphone and tablet screens with their content and services as the fastest viewers are clamorring
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for them. at the same time, new entities are flocking to the market. within the last ten years, youtube, i tunes, netflix, amazon, hulu, sky angel and many others have leapt to provide video over the internet. currently the communications act does not apply to these players. therefore, i have some decisions to make. one option is to recognize the competitive landscape and start deregulating cable, satellite and broadcast companies. the other is to expand the communications act to apply to the new technologies and services. i for one do not believe we should be expanding video regulation. internet distributed video is growing at a remarkable pace in the absence of regulation. video represented more than half of global internet traffic by 2011, according to sisco. video delivered over the internet specifically to televisions doubled in 2011 and will increase six-fold by 2016, representing 11% of consumer internet video traffic.
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by 2016, 1.2 million minutes of video will cross the network every second. it would take more than six million years to watch the amount of video that will cross global i.p. networks each month. existing cable, satellite, broadcast providers and programmers are experimenting with internet distribution. internet only providers and programmers are also springing up. regulation is not only unnecessary in such a vibrant environment, it can actually harm this nascent competition. the creative competition in the marketplace is healthy as parties fight to win viewers. a vibrant marketplace benefits consumers and generates new jobs. the last thing we want is to shackle everyone's entrepreneurial spirit with one size fits all rules designed for another day and time. if we're not going to apply the old regime to the new participants we must recognize the inequity of continuing to apply it to traditional players. the rules were premised on lack of video competition that just
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isn't the reality anymore. to impose the regulations in a disparate fashion is neither technologically nor competitively neutral, not only unfair to the parties, it does viewers a disservice. cable operators, satellite providers and broadcasters should be allowed just as much flexibility to respond to competition from the internet players as we would like the internet players to have to respond to competition from the traditional players. this is how we will spur innovation. with that, i yield the balance of my time to the vice chair of the committee, mr. terry. >> thank you, mr. chairman. a lot has changed in the video marketplace over the last 20 years. content, distribution and consumers' preferences have all evolved. we are a society that wants what we want, when we want it, wherever we want it, and because of this, communications sector has spent billions over the last two decades in order to meet that consumer appetite. as we engage in discussions about the current state of video marketplace, and get bogged down
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in the details of disputes and issues, it is important that we always keep one thing in mind. the consumer is and will always remain the most important component of the discussion. it's appropriate to ask questions about whether the regulations of decades past are, in fact, still appropriate today. do they inhibit competition or spur it. do they create regulatory parity or uneven playing fields. most importantly, do we still work to the betterment of the consumer. or are consumers now caught in the middle. consumers need to benefit from the great expansion in technologies and mobility of technology. with that, i would like to submit for the record the cea letter -- >> without objection. >> -- with regard to the technology. i think my friend from oregon and yield back. >> gentleman yields back the balance of his time. the chair now recognizes the ranking member of the
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subcommittee, my friend from california. miss eshoo. >> thank you, mr. chairman, for having this hearing. i think it's a very important one and certainly when you look at the line outside, there is a great deal of interest. over the past 20 years, the video market has undergone a remarkable transformtransformat. today, consumers have access to more programming choices than ever before and have increasing control over where and when they watch these programs, thanks to the dvr, to the internet and to mobile devices like smartphones and tablets. while we have advanced in so many ways, there are also several key barriers that i'm concerned have or could in the future curtail the exciting innovation that defines the next generation of video. first, when congress passed the
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1996 act, we required the fcc to establish rules to increase consumer choice and competition in the set box market. while we may never have imagined the benefits of internet connected devices like boxy, consumers continue to have limited options when it comes to finding devices with features equivalent to the cable company-issued set top box. second, consumers should not be held hostage when retransmission disputes break down. since 2010, ten different multi-channel video programming distributors have experienced at least 34 blackouts in at least 76 media markets. among the most high profile disputes, which i think all of us recall, was a blackout that prevented millions of households from watching the first two games of the 2010 world series. and i'd like to submit, ask for
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unanimous consent to submit for the record, mr. chairman, the broadcaster retrans blackouts 2010-2012. >> without objection. >> thank you. third, i'm concerned about the potential impact of data caps on the growth of the streaming video market. just two weeks ago, it was widely reported that the department of justice had begun looking into whether data caps unfairly limit online video competition. while we don't know the extent of this inquiry, it falls on this subcommittee to thoroughly examine the issue and ensure future innovation is not curtailed. finally, there are joint agreements involving verizon and several of the nation's largest cable companies that are an example of the changing video landscape. last week, i once again called on -- for the subcommittee to have a hearing to review the
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proposed transaction and i hope chairman upton and walden will agree to this request. i haven't taken a position on these proposed changes or what's in the works, but i do think that we would all benefit from an examination of them. i want to welcome again all of our witnesses that are here this morning, and most especially to the two that have traveled probably the farthest that are silicon valley constituent companies, netflix of los gatos and ropu of saratoga. >> the chair recognizes the full committee chairman, the gentleman from michigan, mr. upton. >> thank you, mr. chairman. the beauty of the free market is that it harnesses the laws of economics to spur competition, especially in the communications sector, if you're not using technology to offer new services
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or cheaper prices, you're not going to last very long. unlike the laws of congress, the laws of economics are exceedingly nimble. if new technologies or new competitors arise, the marketplace begins to adjust almost immediately. legislators and regulators by contrast operate at a glacial pace relative to the speed of technology. even the fcc's data on video competition is six years out of date, let alone the regulations. the laws of economics also encourage diversity. companies that can't provide the same services or content at cheaper prices strive to offer different services or content. that's what we call innovation. many regs by contrast drive everything to the lowest common denominator. if everyone is entitled to whatever content is popular at the moment, why would anyone risk investing in something brand new. if everyone is entitled to the
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fruits of your labor, whether that's your distribution platform or your content, you're less likely to invest as much. indeed, differentiation is often a leading driver of competition. so for example, many attributed the exclusive availability of the football sunday ticket on directv as a prime source of that satellite tv provider's growth. this in turn forces other players to invest in different content, develop better services or lower prices. regulations in that space will only decrease economic activity. if particular behavior were economic, there would be no need to compel it. while such mandates might be warranted in a world of only three broadcast networks, where cable operators serve close to 100% of the pay tv market, that's not the world that we live in anymore. cable share of the subscription tv market has dropped from 98% at the time that congress passed
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the '92 cable act to 68% in 2006 and it's probably about 55% today. that means almost one out of every other home gets their programming from some other source, like a satellite operator or phone company. the number of national program networks grew from 106 in 1994 to 565 in 2006, and the percentage of networks availability with a cable operator shrunk from 53% to 15% in '06. so if we want to spur investment, innovation and jobs, the time may have come to pull back on the laws that congress and the laws of economics do more of the work. viewers across the country not to mention our economy would be better for it. i yield to -- >> we have three on our side. mr. stearns. >> thank you, mr. chairman.
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as miss eshoo pointed out, a little nudge from this committee with legislation would create billions of dollars out there in the audience. as you pointed out, the 1992 cable, mr. chairman, when it was passed, everything's changed dramatically since then. i hope today is a first step towards all of us coming together with a process to modernize the 1992 cable act. as you pointed out, sisco released a study saying 68% of the u.s. mobile data traffic will be video. the current rollout of mobile, dtv by broadcasters and dish pushed to enter into the wireless market are important examples of industry that are simply responding to consumer demand. as many of our witnesses who will testify today, consumers have access to more content, higher quality programming and a greater variety of devices than perhaps ever before so i look forward to learning what is working and what the government can do to advance the future of video even further. >> now recognize the gentle lady
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from tennessee, miss blackburn. >> thank you, mr. chairman. welcome to all of our witnesses today. i think that from the opening statements, you can see we can agree that the constant in the video arena is change. change in innovation and i was thinking through my nearly 20 years of work in both the private and public sector on this issue, and going from big box tvs to home theaters and then watching the analog to digital, now you can carry pretty much whatever you want on the ipad and plug it into a dumb screen and there you go. going forward, i hope we're going to focus on end use. i think consumers are the best at deciding what they want in content and also in their delivery mechanisms. so i look forward to the discussion we're going to have about how we insert free market principles into the good work and innovation you do. yield back. >> gentle lady yields back. recognize the ranking member of
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the full committee, mr. waxman, for five minutes. >> thank you, chairman walden, for holding this hearing to examine the future of video. i look forward to working to assemble an interesting and diverse panel of witnesses. digital technology and broadband internet access are dramatically altering how video content is produced, delivered and consumed, promising more choices and greater value for consumers and new avenues for the creative community to distribute its work. our challenge is to assure diversity of voices, robust competition and greater access to these new platforms. the panel of witnesses before us illustrates the many ways americans can access video programming today free over the air broadcasting, pay television service from cable, satellite, even traditional telephone companies or video delivered through a broadband connection.
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video programming is no longer the exclusive province of the television set. consumers can now use tablets and smartphones to watch their preferred content. innovative products and services are increasingly putting viewers in control of what, when, where and how they watch video. even as we marvel at the incredible advances in technology, we must be mindful that policy choices we make today will impact the video landscape we see tomorrow. we should examine whether the legal framework created 20 years ago still works for a video market filled with choices that did not even exist two or three years ago, and we should remember that old challenges can persist in the face of new opportunities. competitors need a fair shot at gaining access to content and independent creators need rules that prevent discrimination against carriage of their
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programming. two days ago, the actions of this committee and others in congress helped once nascent industries like cable and satellite to offer new choices for consumers. today, we must continue to ensure innovation in the video marketplace can continue to flourish as consumers increasingly watch video through broadband and open internet that is accessible to all becomes even more important. we need to carefully examine whether practices like broadband, data usage caps are restricting consumer choice or being employed in an anti-competitive manner. also deserving of our scrutiny is whether major providers of video and broadband services will continue to have the incentives to compete in light of joint agreements and consolidation in the marketplace, and i join our ranking member eshoo in requesting hearings to examine the proposed transactions
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between verizon and four of the nation's largest cable companies, including an examination of the joint marketing agreements that would allow the companies to cross-market each other's services. i hope the committee will convene a hearing so that members can consider the impact of these deals not only on the video and broadband markets, but also on wireless competition. i appreciate all the witnesses for participating in today's hearing. i look forward to your testimony. i want to yield time to miss degette. >> thank you, mr. waxman. thank you for coming. i yield back. >> i join you in welcoming all of our panelists, whether they came all the way from california or down the street from k street. welcome to you all. yield back my time. >> gentleman yields back the
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balance of his time. we will get on with our witnesses now. again, thank you all for being here. we will start with mr. robert johnson, ceo of sky angel, us, llc. thank you for being here. we appreciate reading through your testimony and look forward to your comments. just for all the panelists, if you haven't used these microphones, you really need to get pretty close to them, make sure the light's on. >> chairman walden, ranking member eshoo and members of the subcommittee on communications and technology, it is my pleasure to have this opportunity to testify at your hearing today on the future of video and thank you for inviting me to participate. my name is rob johnson. i'm one of the founders of sky angel and its chief executive officer. sky angel was founded for the purpose of providing american families with a high quality and affordable video distribution service in their homes that would offer exclusively family-friendly programming. today offers more than 80 channels that are live linear
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programming networks, many of which are familiar in american households such as the hallmark channel, fox news, the nfl channel, bloomberg and the weather channel, to name a few. also, we will be adding a new african-american family channel started by magic johnson. sky angel was the first american video programming distributor to provide a service which uses internet protocol television technology or ip tv in a set top box. subscribers cannot access sky angel's encrypted programming without a set top box which has broadband internet inputs, including home wireless router access and video outputs that connect directly to their television sets. sky angel is not a web-based service and no external computer is needed to subscribe to or receive sky angel programming. all any american family needs for sky angel is a television set and a broadband internet
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service of modest capability. our set top boxes look and act like the ones consumers ordinarily use at home. here is one of them. a sky angel subscriber selects programming with the use of a typical remote control. subscribers simply use our remote to scroll up and down the screens of live channel choices and then clicks on the selection he or she wants to watch. from a consumer's perspective, the sky angel service is functionally identical to typical cable or satellite video distribution. sky angel offers consumers a competitive alternative to other mvpd systems at affordable rates. currently, our complete package of more than 80 live video and audio programming channels costs $32.99 a month. it includes unlimited access to a large vod library of movies, which are also family-friendly. we have recently rebranded the package as fave tv.
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we have a less expensive inspirational package of programming which is also available to the ipad. our goal is to offer a safe haven for families and children to enjoy as large a selection as possible of live video and audio programming and recorded video programming without fear of exposure to graphic sexual or other highly objectionable content. we are proud recipient of the seal of approval from the parents television council. american families can have sky angel in their homes as an exclusive source of wholesome video entertainment or they can subscribe and have sky angel in addition to another mvpd. the choice is theirs. our business model is not complicated. we enter into written agreements with programmers for distribution of programming to sky angel subscribers via our ip tv system. we pay the programmers monthly fees for sky angel subscriber who receives the programmer's channel. sky angel enters into subscription relationships with consumers for multiple live linear channels of programming.
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we down link our channel at our state of the art head end located outside of chattanooga. we provide our subscriber with set top boxes which are necessary to receive the programming from sky angel and we directly and remotely control the programming through the set top box at all times. unfortunately, we have been faced with significant problems in obtaining access to family-friendly programming channels. one shocking example is c-span, which is supposed to be a public service but c-span refuses to deal with us. about three years ago, c-span entered into an agreement with us for distribution of c-span channels on the sky angel system. however, c-span cut its service off only three days after we started carrying it and we had a signed contract. c-span officials told us that they had quote, made a mistake in permitting sky angel to carry its channels without any other explanation. as everyone knows, c-span is offered on the internet as a free public serviceo
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